Wednesday, June 26, 2013

Steve Blank at the Berkeley blog has a nice piece about rent seeking strangling innovation. He doesn't set out to highlight how rent seeking has diminished innovation in the transport sector, but he ends up doing so with examples including auto dealers blocking Tesla, protectionist policies that distort auto imports and manufacturing, and taxi services. Rather than me writing new explanations of rent seeking, here is what he wrote:

Rent seekersRent seekers are individuals or organizations that have succeeded with existing business models and look to the government and regulators as their first line of defense against innovative competition. They use government regulation and lawsuits to keep out new entrants with more innovative business models. They use every argument from public safety to lack of quality or loss of jobs to lobby against the new entrants. Rent seekers spend money to increase their share of an existing market instead of creating new products or markets. The key idea is that rent seeking behavior creates nothing of value.
These barriers to new innovative entrants are called economic rent. Examples of economic rent include state automobile franchise laws, taxi medallion laws, limits on charter schools, auto, steel or sugar tariffs, patent trolls, bribery of government officials, corruption and regulatory capture. They’re all part of the same pattern – they add no value to the economy and prevent innovation from reaching the consumer.

.....

How do rent seekers win?

Instead of offering better products or better service at lower prices, rent seekers hire lawyers and lobbyists to influence politicians and regulators to pass laws, write regulations and collect taxes that block competition. The process of getting the government to give out these favors is rent-seeking.
Rent seeking lobbyists go directly to legislative bodies (Congress, State Legislatures, City Councils) to persuade government officials to enact laws and regulations in exchange for campaign contributions, appeasing influential voting blocks or future jobs in the regulated industry. They also use the courts to tie up and exhaust a startupslimited financial resources.

Lobbyists also work through regulatory bodies like FCC, SEC, FTC, Public Utility, Taxi, or Insurance Commissions, School Boards, etc. Although most regulatory bodies are initially set up to protect the public’s health and safety, or to provide an equal playing field, over time the very people they’re supposed to regulate capture the regulatory agencies. Rent Seekers take advantage of regulatory capture to protect their interests against the new innovators.

There have been shockingly few service and technological innovations in all aspects of regulated transport over the past few decades. Automobility is long in the tooth for a technology, which may be why we are seeing a decline in auto travel. Transit has performed poorly relative to investment, with few productivity gains and only minor service improvements since the mid-1970s*. Taxi services remain largely unchanged to the point that few cities have bothered to even consider changing how many taxicabs are allowed.

A major reason that there have been so few innovations is because of rent seeking, and understanding economic rents is critical for all planners and transport officials. Here are a couple of recent rentier examples that make cities worse off: LA blocks taxi apps, and Veolia engages in regulatory capture. Many of the rent seekers are private companies, so don't think that privatization is the key to innovation. Rentiers can be private or public, and in all cases make the public and consumer worse off.

*I am referring to transit in the US generally, not specific lines or station areas. While the past few years transit ridership has grown faster than the population overall, transit ridership is below 1970 levels by nearly all metrics. This helps illustrate the problem.

Sunday, June 2, 2013

This timelime and diagram of Los Angeles transit agencies is impressive. It presents an honest history of transit agencies in Los Angeles and doesn't promote the false idea that there was some type of streetcar scandal or conspiracy.

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About Me

David King is an Assistant Professor of Urban Planning.His research explores the impact of local
transportation planning on the built environment, public finance, social equity
and accessibility.As part of this
research he has written about the phenomenon of cruising for parking and used
spatial regression techniques to analyze travel behavior.He also studies how public policy influences
the adoption of new technologies to address congestion, energy and
environmental concerns.These issues are
the focus of Professor King’s teaching through his courses covering planning
techniques and methods, transportation and land use planning and transport
policy.